Market for luxury homes defies economic gravity

The housing market, may be cooling, but the market for “millionaire” homes is heating up, a major real estate group says.

“Improved financial standing among high net worth individuals is the major factor driving strong sales activity at the top end of Canadian housing markets,” RE/MAX said in a report Wednesday.

Sales of luxury homes have surged during the first four months of this year from a year earlier in nearly two-thirds of housing markets across the country, led by an increase of 118 per cent in Greater Vancouver, where foreign investment has played a major role, followed by increases of 59 per cent in Ottawa, 51 per cent in Calgary, 27 per cent in Halifax-Dartmouth, 24 per cent in Winnipeg, 13 per cent in Hamilton-Burlington, and nine per cent in Greater Toronto.

Further, all of those hot markets other than Calgary, are poised to set new records for sales of top-end homes this year, while several other cities are just short of the peak levels reached last year, including Victoria, Regina, and London-St. Thomas.

“That demand remains largely domestic speaks to the solid underpinnings of the market, while underscoring the appeal of Canadian real estate on an international stage,” he said, adding that purchases of top-end homes in Western Canada, in particular, will continue to be boosted by investment from abroad.

However, the report noted that increases in wealth, and in the number of wealthy households, thanks to the improvement in the economy, and in large part to gains in the stock market, are fuelling demand for higher-priced homes.

The portfolios and assets of most Canadian millionaires have recovered fully from the global financial crisis, noted the report which covers homes with a $2-million plus price tag in Vancouver, $1.5-million and up in Toronto and ranging to $500,000 in several smaller cities.

“Of particular interest, residential real estate holdings have increased among high net worth individuals, as they express a clear preference for tangible assets,” it added.

The report comes only a day after the Canadian Real Estate Association reported that home sales in April were down nearly 15 per cent from a year earlier, a steep drop that it blamed in large part on new federal government mortgage lending restrictions for the much of the plunge.

Analysts, however, predict the expected slowdown in the overall economy, as well as high debt levels of households, will weigh on the housing market this year.